Supercharging electrification
- By Adele Naudy Chambaud & Vincent Petit
- 22 Oct 2025
- 5 min
“Europe keeps facing a clear energy trilemma, which combines the need to decarbonize its energy system with growing concerns on energy security and affordability... to break off this situation, the solution for the EU is clear: it is electrification.” - Laurent Bataille, EVP Europe Operations, Schneider Electric
Europe is currently facing an energy trilemma that threatens its economic future: the need to decarbonize while maintaining energy security and affordability. Despite reducing emissions by 37% since 1990, the EU still imports for nearly 60% of its energy supply — a €380 billion annual drain on the economy. Meanwhile, energy costs remain 2-5 times higher than in the United States and China, eroding industrial competitiveness. Electrification, the clear solution to this trilemma, has stagnated at 21% of final energy consumption for over a decade.
The path forward is unambiguous. Electrification powered by domestic renewables and nuclear energy offers Europe the opportunity to break free from fossil fuel dependency, modernize its industrial base, and reclaim its competitive position. The technology exists, the economics are compelling, and the potential is transformative — yet progress remains frustratingly slow.
Electrification uniquely addresses all three dimensions of Europe's energy challenge. By replacing imported oil and gas with locally-generated clean electricity, Europe can simultaneously cut emissions, enhance energy security, and drive industrial modernization. The technical feasibility is proven: mature technologies already exist to electrify over 80% of energy use across buildings, transport, and industry. Heat pumps, electric vehicles, and industrial electrification solutions are market-ready and deployed at scale in leading markets.
The economic potential is equally compelling. Achieving 50% electrification by 2040 — the EU Commission's stated target — would reduce fossil fuel imports by two-thirds, saving approximately €250 billion annually. This level of electrification would redirect massive capital flows from foreign energy suppliers to domestic economic development, creating jobs, and building resilient local supply chains.
Yet while Europe deliberates, competitors act. China's electricity share has grown 10 percentage points over the past 15 years to reach 26-28%, with projections to hit 35% by 2030. This rapid electrification underpins China's industrial competitiveness and growing dominance in clean technology manufacturing. Europe risks being left behind in the race that will define 21st-century economic leadership.
Despite clear benefits and ambitious targets, Europe's electrification remains stuck. Electric vehicles represent just 4% of the fleet against a 20% target for 2030. Heat pumps are installed in only 16% of buildings, far below the 45% needed by decade's end. Industrial electrification similarly lags, with electricity accounting for just 33% of industrial energy use versus a 35% near-term goal.
* Both residential and commercial buildings, data 2023, corresponding to around 20 million units in the stock, including 60% in residential. Building stock is about 100 million households and 10 million commercial buildings.
** This figure includes non-energy feedstocks. The figures reported per country exclude energy feedstocks and correspond to an average share of 33%. The overall ambition of the EU is to reach 35% by 2030, i.e., +14 points in the mix, including energy feedstocks.
The core barrier isn't technology — it's economics and accessibility. High electricity prices relative to gas, complex financing mechanisms, and fragmented policy incentives all conspire against electrification. Inconsistent standards, information asymmetries, and underdeveloped local delivery ecosystems create friction that slows adoption even where economics are favorable. The result: a transition that should be accelerating remains mired in structural impediments.
Priority 1: Make electrification competitive
Europe must urgently close the economic gap that disadvantages electricity versus fossil fuels. This requires immediate action on three fronts:
- Reform energy pricing and taxation. Ending remaining fossil fuel subsidies, particularly in Germany, Poland, and France, while rebalancing tax structures to favor clean electricity over gas, would immediately improve electrification economics. Accelerating smart meter deployment — currently at just 58% versus an 80% target — would enable flexible tariffs that reward demand response and distributed generation.
- Accelerate financing support. Europe needs investment mechanisms comparable to the to the ambitions of the U.S. Inflation Reduction Act, which initially mobilized around $500 billion for clean energy and industry. The new Industrial Decarbonization Bank is a start but must focus specifically on electrification projects. ETS revenues and Innovation Fund resources should be directed primarily toward electrification, with targeted support for SMEs who currently lack access to transition financing.
- Leverage flexibility for dramatic cost reductions. Schneider Electric research suggests that combining electrification with on-site renewable generation, storage, and digital controls can cut energy bills ranging between 15-80%. In industry, flexible electrification makes green steel and ammonia production cost-competitive with conventional methods. For buildings, payback periods range from 3-20 years with returns well above typical hurdle rates. This "demand-side flexibility" transforms electrification from a cost burden into a competitive advantage.
Priority 2: Make electrification accessible
Creating competitive economics alone won't drive the transformation. Europe needs a robust local delivery ecosystem to make electrification accessible at scale.
- Create predictable market demand through strategic mandates. All new construction should be required to be fully electric and flexible — there's no justification for installing fossil fuel systems in buildings that will operate for decades. Accelerate boiler replacement programs across buildings and industry, where electric alternatives are mature and cost-effective. For heavy industry, implement contracts for difference and tripartite agreements that provide long-term price certainty for green steel and chemicals.
- Foster local industrial development to build Europe's electrification supply chain. Leverage public procurement — 14% of EU GDP — to create demand for electrification solutions with minimum European content requirements. Accelerate standardization of installation procedures to reduce costs and improve quality. Establish market clearinghouses to address information asymmetries that particularly affect SMEs. Focus industrial strategy and support on technologies where Europe can still lead: batteries, electrolyzers, and digital energy management systems.
By supercharging the transition to an electrified economy, Europe can reclaim energy independence, restore industrial competitiveness, and secure long-term prosperity. The continent possesses the technology, financial resources, and human capital to lead this transformation.
Supercharging electrification is Europe's opportunity to turn decarbonization from a cost into a competitive advantage, from dependency into sovereignty, from decline into renewal. The moment for action is now.
Explore the full Supercharging Electrification: Europe’s Energy Security & Competitiveness report to discover four key actions to accelerate Europe’s clean energy future.
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